Kirkland's Reports Second Quarter 2012 Results

NASHVILLE, Tenn.--()--Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week and 26-week periods ended July 28, 2012.

Net sales for the 13 weeks ended July 28, 2012, increased 1.5% to $91.0 million compared with $89.7 million for 13-week period ended July 30, 2011. Comparable store sales, including e-commerce, for the second quarter of fiscal 2012 decreased 3.6% compared with a decrease of 8.0% in the prior-year quarter. Kirkland’s opened 10 stores and closed 5 during the second quarter of 2012, bringing the total number of stores to 302 at quarter end.

Net sales for the 26-week period ended July 28, 2012, increased 2.6% to $188.8 million compared with $184.1 million for the 26-week period ended July 30, 2011. Comparable store sales, including e-commerce, for the 26 weeks ended July 28, 2012, decreased 2.4% compared with a decrease of 8.2% in the prior-year period. The Company opened 15 stores and closed 22 stores during the 26-week period.

The Company reported a net loss of $2.0 million, or $0.11 per diluted share, for the second quarter of fiscal 2012 compared with a net loss of $0.5 million, or $0.02 per diluted share, for the second quarter of fiscal 2011.

For the 26-week period ended July 28, 2012, the Company reported a net loss of $42,000, or $0.00 per diluted share, compared with net income of $2.7 million, or $0.13 per diluted share, for the 26-week period ended July 30, 2011.

Commenting on the second quarter results, Robert Alderson, Kirkland's President and Chief Executive Officer, said, “The distinct change in consumer sentiment we noted a few months ago continued throughout this quarter and pressured our results. While sales in the stores were below what we expected and e-commerce better-than-anticipated, promotional activity was more extensive than normal for the second quarter and impacted merchandise margins.

“We have yet to see the sustained demand necessary to drive the results we all expect from Kirkland’s, but we are aggressively addressing these trends to position us for improved performance over the next several quarters. We are pursuing an expansion of our e-commerce business, a new brand strategy, a major store layout redesign and leveraging the rollout of new information systems to improve our merchandise buying and planning execution.”

Stock Repurchase Plan

During the second quarter of fiscal 2012, the Company repurchased 1,142,464 shares of common stock for a total of $13.4 million, or an average price of $11.74 per share, which completed the Company’s repurchase plan. Since the inception of the plan in August 2011, the Company repurchased 3,394,693 shares for a total of $40 million, at an average price of $11.78.

Updated Fiscal 2012 Performance Goals

Store Growth:

For the 53-week period ending February 2, 2013 (“fiscal 2012”), the Company expects to open 40 to 44 new stores and close approximately 30 stores. This expected unit growth of approximately 4% would represent an increase in company-wide square footage of approximately 9%.
 

Sales:

The Company expects total sales for fiscal 2012 to increase in the range of 4% to 6% compared with fiscal 2011. This expectation for total sales growth reflects the additional week in the retail calendar for Fiscal 2012. This level of sales growth would imply a comparable store sales decrease in the low single digit range, excluding the impact of the additional week of sales.
 

Margins:

Based on the current outlook, the Company expects operating margin in fiscal 2012 to be 200 to 250 basis points below fiscal 2011 due to expected increases in container rates in the second half of the year combined with a continued promotional environment, as well as investments in additional personnel in key areas of the business to support the Company’s growth plans and technology investments.
 

Earnings:

Based on the above assumptions, the Company expects earnings per share for fiscal 2012 to be in the range of $0.72 to $0.82. The Company expects its effective tax rate for fiscal 2012 to range between 38% and 38.5%.
 

Cash Flow:

Excluding activity under the Company’s share repurchase program, the Company expects to again generate positive cash flow in fiscal 2012. Capital expenditures in fiscal 2012 are estimated to range between $29 million and $32 million.
 

Third Quarter Fiscal 2012 Outlook

For the third quarter ending October 27, 2012, the Company expects a net loss of $0.03 to $0.07 per diluted share compared with net income of $0.06 per share in the prior-year quarter. Net sales are expected to be $97 million to $99 million, with comparable store sales down 3% to 5%. The Company expects to open approximately 14 to 16 stores and close approximately 4 stores during the quarter.

Investor Conference Call and Web Simulcast

Kirkland’s will host a conference call at 11:00 a.m. ET today to discuss the second quarter results. The number to call for the interactive teleconference is (212) 231-2919. A replay of the conference call will be available through Friday, August 24, 2012, by dialing (402) 977-9140 and entering the confirmation number, 21575899.

A live broadcast of Kirkland's quarterly conference call will be available online at the Company's website www.kirklands.com under Investor Relations or http://www.videonewswire.com/event.asp?id=88700 on August 17, 2012, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.

About Kirkland’s, Inc.

Kirkland's, Inc. was founded in 1966 and is a specialty retailer of home décor in the United States. Although originally focused in the Southeast, the Company has grown beyond that region and currently operates 300 stores in 30 states. The Company's stores present a broad selection of distinctive merchandise, including framed art, mirrors, candles, lamps, picture frames, accent rugs, garden accessories and artificial floral products. The Company's stores also offer an extensive assortment of gifts, as well as seasonal merchandise. More information can be found at www.kirklands.com.

Forward-Looking Statements

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Kirkland's actual results to differ materially from forecasted results. Those risks and uncertainties include, among other things, the competitive environment in the home décor industry in general and in Kirkland's specific market areas, inflation, product availability and growth opportunities, seasonal fluctuations, and economic conditions in general. Those and other risks are more fully described in Kirkland's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K filed on April 12, 2012. Kirkland's disclaims any obligation to update any such factors or to publicly announce results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(numbers in thousands, except per share amounts)
           
 
13 Week Period Ended

July 28,

July 30,
2012 2011
 
Net sales $ 91,004 $ 89,701
Cost of sales   61,010     58,856  
Gross profit 29,994 30,845
 
Operating expenses:
Operating expenses 30,741 28,752
Depreciation   3,205     2,733  
Operating loss (3,952 ) (640 )
 
Other expense (income), net   22     (42 )
Loss before income taxes (3,974 ) (598 )
Income tax benefit   (1,977 )   (118 )
Net loss $ (1,997 ) $ (480 )
 
Loss per share:
Basic $ (0.11 ) $ (0.02 )
Diluted $ (0.11 ) $ (0.02 )
 
Shares used to calculate loss per share:
Basic   17,470     19,957  
Diluted   17,470     19,957  
 
 
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(numbers in thousands, except per share amounts)
           
 
26 Week Period Ended
July 28, July 30,
2012 2011
 
Net sales $ 188,792 $ 184,104
Cost of sales   120,329     115,171  
Gross profit 68,463 68,933
 
Operating expenses:
Operating expenses 63,025 58,433
Depreciation   6,220     5,974  
Operating income (loss) (782 ) 4,526
 
Other expense (income), net   19     (5 )
Income (loss) before income taxes (801 ) 4,531
Income tax provision (benefit)   (759 )   1,841  
Net income (loss) $ (42 ) $ 2,690  
 
Earnings (loss) per share:
Basic $ (0.00 ) $ 0.13  
Diluted $ (0.00 ) $ 0.13  
 
Shares used to calculate earnings (loss) per share:
Basic   17,869     19,936  
Diluted   17,869     20,645  
 
 
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
                       

July 28,

January 28, July 30,
2012 2012 2011

ASSETS

 
Current assets:
Cash and cash equivalents $ 49,614 $ 83,123 $ 75,106
Inventories, net 49,773 47,306 47,656
Income taxes receivable 3,727 - 3,880
Deferred income taxes 1,635 1,657 3,274
Other current assets   10,138   7,784   9,283
Total current assets 114,887 139,870 139,199
 
Property and equipment, net 68,840 60,315 51,940
Non-current deferred income taxes 1,086 1,108 1,394
Other assets   1,425   1,296   847
 
Total assets $ 186,238 $ 202,589 $ 193,380
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 22,583 $ 21,592 $ 17,011
Income taxes payable - 3,146 -
Other current liabilities   20,772   21,805   21,527
Total current liabilities 43,355 46,543 38,538
 

Deferred rent and other long-term liabilities

  40,159   38,384   31,999
Total liabilities   83,514   84,927   70,537
 
Net shareholders' equity   102,724   117,662   122,843
 
Total liabilities and shareholders' equity $ 186,238 $ 202,589 $ 193,380
 
 
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
             

26 Week Period Ended

July 28, July 30,
2012 2011
Net cash provided by (used in):
 
Operating activities $ (2,364 ) $ (5,606 )
Investing activities (14,786 ) (11,811 )
Financing activities   (16,359 )   1,301  
 
Cash and cash equivalents:
Net decrease (33,509 ) (16,116 )
Beginning of the period   83,123     91,222  
End of the period $ 49,614   $ 75,106  
 

Contacts

Kirkland's, Inc.
W. Michael Madden, 615-872-4800
Senior Vice President & CFO
or
Corporate Communications, Inc.
Tripp Sullivan, 615-324-7335

Contacts

Kirkland's, Inc.
W. Michael Madden, 615-872-4800
Senior Vice President & CFO
or
Corporate Communications, Inc.
Tripp Sullivan, 615-324-7335